In most recent time, Nigerian Deposit Money Banks (DMBs) are seen leveraging guaranteed facilities from development intuitions to meet the various financing needs of their customers.
On February 27, 2020, IFC, a member of the World Bank Group, announced a $25 million local-currency investment in a risk-sharing facility to expand Union Bank’s lending to small and medium enterprises (SMEs) in Nigeria.
Also at the weekend, IFC announced a $40 million trade finance guarantee facility to Coronation Merchant Bank under its Global Trade Finance Program.
Uche Olowu, president/chairman of council, Chartered Institute of Bankers of Nigeria (CIBN) said what the banks are doing is to mobilise liquidity for on-lending to the critical sector of the economy.
The Central Bank of Nigeria (CBN) in July 2019, introduced the policy requirement that targeted Loan to Deposit Ratio (LDR) at a minimum of 60 percent by the end of September 2019 and later increased it to 65 percent by the end of December 2019.
The IFC – Union bank facility, which will cover as much as 50 percent of the risk of the bank’s loans to entrepreneurs, aims to help Nigerian businesses grow and create jobs.
With IFC’s support, Union Bank plans to offer more products and services to women-owned businesses, especially in Nigeria’s conflict-affected Northern and Delta regions, where entrepreneurs face particularly difficult challenges accessing finance, and more than half the population is excluded from the financial system.
Emeka Emuwa, chief executive of Union Bank, said, “Union Bank continues to develop sustainable products and services that promote enterprise and address poverty and financial inclusion. This is in line with our commitment to support the communities within which we operate. The IFC facility is a welcome development which will further deepen our efforts to support Nigerian SMEs and women.”
Commenting on the initiative, Eme Essien Lore, IFC’s Country Manager for Nigeria said; “IFC’s risk sharing facility will help Union Bank increase its focus on Nigeria’s underserved areas, positioning it as one of the leading banks that provides customized services to SMEs that are driving job creation and growth across the country.”
Although small businesses provide over 80 percent of Nigeria’s jobs, a recent World Bank survey found that only 15 percent of SMEs in the country reported having a bank loan or line of credit. It also found that more than half of the women-managed firms surveyed named access to finance as a major obstacle to growth.
For Coronation Merchant Bank, the facility will enable it to establish and expand correspondent banking partnerships with several international banks in IFC’s trade finance program, broadening access to finance in Nigeria.
IFC’s Global Trade Finance Program (GTFP) will offer confirming banks full or partial guarantees to cover the trade-related payment obligations of Coronation Merchant Bank. The program supports trade with emerging markets worldwide, allowing participants conveniently finance their imports and exports and promotes the flow of goods and services between developing countries.
Commenting on the partnership with IFC, Banjo Adegbohungbe, acting managing director of Coronation Merchant Bank stated that “The GTFP partnership is a critical milestone for us in our journey to become a leading financial institution in Nigeria. We are delighted to partner with the IFC in providing trade finance solutions to our customers and we assure all our clients of our continued support to enable them achieve their business objectives.”
“We welcome Coronation Merchant Bank to the Global Trade Finance Program, which has been very active in Nigeria in the past. This relationship will help improve the bank’s trade with other countries, and create new economic opportunities in Nigeria,” said Kevin Njiraini, IFC’s director for Southern Africa and Nigeria. “The partnership attests to the continued growth of the Nigerian financial sector and restates IFC’s commitment to emerging markets around the world.”
